The multi-sided business model is when you identify two or more different customer groups; and after interacting with each you design and deliver your goods or services in a manner that connects the two parties.
This Pathway Requires
A multi-party arrangement (triadic) where an Organisation identifies two different customer groups A and B; and delivers to each group a (different) product, service or solution.
However, there is an additional requirement: B must get additional benefits from A’s usage that is orchestrated by the Organisation. The value proposition is multi-dimensional: the Organisation delivers independent benefits to each of A and B; and it orchestrates additional value between A and B (externalities).
The oldest multi-sided business model is the charity for the poor – donors give money to provide services for others and receive benefits from their consumption. This pathway requires that:
The Organisation has to identify and provide a product or service that is of use to customer group A.
This product or service also has to generate a positive externality (benefit) to another group of customers B.
The Organisation has to persuade B that it should pay money for the costs of supplying A, perhaps in exchange of an additional service.
The positive externality created by the exchange between A and B may be orchestrated by actors who lie outside of the boundary of the Organisation.
Some firms develop a special reputation in a market serving a group of customers B that generates possibilities of additional income from reselling some of the knowledge gained in this activity to a wholly separate group of customers A. And in this process, generating positive interactions between A and B. (This is the case of Ferrari Formula One – that resells the technology developed on the race track to other car companies in the form of best in class components.)
Failure rates are very high for this business model – but when successful, profits are larger than product equivalent – e.g. Google
Scalability – Many organisations start with developing a service for one customer group A that is provided for free but that is perceived as very valuable, and only when this customer group becomes really large does the firm look for another group of customers B to join and provide the revenues. (This is the Facebook story).
Profitability – Potential to be very high, if network effects are strong and there are low ongoing costs of facilitating positive externalities that result from exchange between Customer groups A and B.
Risk – Potentially quite high: the organisation is ultimately ceding control of the value proposition behind the exchange between customer groups A and B, because this model requires that customers are entrepreneurs and that customer group A will continue to have something of value to customer group B.
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A multi-sided business model platform each of whose customer groups adds value to the other groups has a high chance of being very successful, as is vividly demonstrated by the success of the Google multisided platform.
However, there are often large niches that a large multisided business model platform cannot serve well, because the additional partners destroys value. Advertising supported search engines have not been successful in markets such as real-estate and job search, where customers do not want an advertising component.
Market such as computer games are an excellent example of an industry where serious gamers do not want advertising supported offerings, and are willing to pay premiums for good product business model offerings and solutions business model offerings.
A multi-sided business model platform each of whose customer groups adds value to the other groups has a high chance of being very successful, as is vividly demonstrated by the success of the Google multisided platform.
However, there are often large niches that a large multisided business model platform cannot serve well, because the additional partners destroys value. Advertising supported search engines have not been successful in markets such as real-estate and job search, where customers do not want an advertising component.
Market such as computer games are an excellent example of an industry where serious gamers do not want advertising supported offerings, and are willing to pay premiums for good product business model offerings and solutions business model offerings.
Regulatory threats are serious for multisided business model businesses. Governments are increasingly worried about the conglomerate nature of multi-sided businesses, and shifting to a simpler product business model or solutions business model may well alleviate these pressures.
Chegg
Chegg is an online business based in Santa Clara, California that operates in the ‘learning’ space of the sharing economy. At its inception, the company employed a product business model, primarily offering textbooks to rent both in digital and hard-copy format.
Overview
The company further evolved into a portfolio of business models: in addition to the original product business model, Chegg has deployed a matchmaking business model to offer a breadth of digital services to students by connecting them with tutors, intern-seeking companies, as well as with various bodies offering scholarships. Where Chegg also offers marketing services to large consumer product companies, it also deploys a multi-sided business model: it leverages its vast access to data to provide tailored marketing campaigns.
The company name is a contraction of the words ‘chicken’ and ‘egg,’ reflecting the founders’ frustration in being unable to secure a job graduation without the necessary experience and/or education.
History
In 2001 Josh Carlson, with two other students, created a classified-ad type website for students at Iowa State University. The business potential of the site attracted the attention of fellow students, Aayush Phumbhra and Osman Rashid, who aspired to thrust the website’s penetration to the national level. In August 2005, the three graduates launched Chegg, Inc. with Carlson leaving in February 2006. Buoyed by external investment in April 2006, the co-founders resigned from their jobs to focus on promoting Chegg on college campuses across the US and to test the business’ services. Using the Netflix model as a template (after noting the success of the online rental model), they launched the textbook rental site “textbookflix.com” in the summer of 2007 changing it to “Chegg.com” in December 2007. The company floated on the New York Stock Exchange on November 13 2013 raising $187.5m and giving it an initial market capitalization of approximately $1.1 billion.
In August 2014, Chegg entered into a strategic partnership with Ingram Content Group whereby it aims, in the long-run, to take over full responsibility for all aspects of the print rental model – so that it purchases 100% of textbook inventory, controls pricing and stock selection, and holds responsibility for distribution, logistics and stock warehousing. Chegg’s hope is to significantly reduce its overhead costs.
Customers
The primary customer group continues to be students attending school or a higher education institution. The original focus was to provide an affordable way for students to acquire learning resources and support, to help them navigate through academic institutional life. This has expanded to providing a platform through which students can access teaching support, internship offers and a great source of information on colleges.
Secondary customers include teachers offering support in disciplines ranging from accounting to Mandarin can use Chegg to provide online tutoring to its subscribers, as well as companies or institutional bodies offering respectively internship and scholarship positions.
Additionally, Chegg also caters to large consumer product brands – i.e., RedBull, Coca-Cola, Tide – that seek to reach the primary student-customer group.
Engagement — Value Creation Proposition
The rental service allows students to use textbooks for half the original purchase price. The convenience of having either books delivered or access online makes the process of learning less burdensome. It also endows students with flexible access to various sources of educational support, that would not be ordinarily open to them, and matches students who need help with tutors that are available 24/7 in under 5 minutes. Chegg also lists internship opportunities, exam preparation/advice and information on both colleges and the various scholarships available to students. This, therefore, makes Chegg a one-stop platform for college students regarding educational matters.
Chegg uses its connection with over 40 million students to offer marketing services to companies, Chegg College Marketing. Some examples of partnerships ventures are product sampling contained within the Chegg delivery box, experiential programs on campus, direct emails and app/website advertising. Using the rich stream of data collected through the browsing activity of its users – courses, book preferences, student gender, class year, major etc. – Chegg implements tailored marketing campaigns on behalf of consumer brand customers.
Delivery — Value Chain
Students enter the details of the books they want to rent for the term on the website. Chegg stores books in a warehouse in Shepherdsville, Kentucky and delivers them using the UPS delivery service. It offers students a 21-day return and money-back guarantee option for any reason. Students send back the books using the pre-paid postage barcode provided paying for any late fees that they may incur.
As previously noted, it is assumed that much of the responsibility for managing each step of the physical value chain will defer to Ingram in time. The ultimate aim of Chegg is to cut costs and achieve 100% digital revenue.
Monetisation — Value Capture
Chegg has historically acquired an inventory of books for which it charges a rental fee – its main source of revenues – from students. Rental fees are less than the retail price of the texts. Students are charged in advance ahead of term allowing Chegg to fund further book acquisitions. Profitability is based on the number of times books are rented before either becoming obsolete (by being revised or updated) or no longer in demand e.g. outside course scope or needs. Chegg does also sometimes offer older texts for sale to students.
For their tutoring scheme they offer packages of $1 per minute, monthly plans of 120 minutes for $72 and $24 a month for 30 minutes, whilst Chegg pays $20 per hour to its tutors.
The Ingram alliance has fundamentally altered Chegg’s revenue model in line with its long-term aim to hand over its print inventory to Ingram and its intention to no longer invest in inventory going forward. This strategy aims to boost overall profitability through a combination of greatly reduced depreciation expenses on books whilst only slightly reducing revenue. Chegg currently also earns a commission through each book rented through its platform from Ingram and hopes to reduce print revenue to zero by early 2017 with Chegg’s revenue being 100% digital. Revenue lines in 2015 were split 54:46 between print revenue (rental or sale) and digital revenue from digital learning services, advertising and commission from Ingram.
Advertising starts from a minimum of $25,000 to beyond $250,000. For the year ended December 31, 2015 Chegg has advertising contracts with 60 consumer brands.
http://uk.businessinsider.com/chegg-acquisition-presentation-2015-2?r=US&IR=T
http://brandongaille.com/chegg-business-model-and-marketing-strategy/
http://investor.chegg.com/press-releases/press-release-details/2015/Chegg-Reports
http://www.fool.com/investing/general/2016/02/23/why-chegg-inc-stock-plummeted-today.aspx
http://adexchanger.com/data-exchanges/chegg-uses-data-to-connect-college-students-with-brands/
Credit Karma
Credit Karma is a fintech business using a multi-sided business model to connect companies and customers through an online platform where, in exchange for entering personal information, individuals can access and monitor their credit report/scores for free.
Overview
The company’s core business is not a solution model since customer groups use Credit Karma as the intermediary for their transactions.
Credit Karma offers access to these scores for free by using tailored product ads for loans and credit cards based on an individual’s credit profile as their source of revenue. The adverts displayed have additional value for consumers as only products that match an individual’s credit profile are displayed. These products are sorted and highlighted based on the probability of a customer’s application being approved.
Credit Karma provides this service through tailored recommendations and via a search and comparison engine for credit cards and loans. Companies pay Credit Karma to promote their products on this engine, with Credit Karma also taking commission for lead generation. Credit Karma states it does not sell, rent or share information of its users.
Businesses showcasing their products on Credit Karma’s search and comparison engine creates additional value for consumers looking to discover their credit score, as these customers may then assess credit products that have been pre-selected to fit their credit profile. Consumers access this additional value through the search and comparison engine provided by Credit Karma or through the recommendations section of their profile. This indicates that for customers who enter data Credit Karma operates a triadic multi-sided business model.
In addition to the core business model Credit Karma offers its users a portfolio of supporting services including tracking of credit card, loan transactions and balances; forums for financial product reviews and credit advice; calculator tools for debt repayment, home affordability and simple loans.
History
Kenneth Lin founded credit Karma in June 2007 to make credit reports easier to access and more transparent. The company now employs over 250 staff and is based in San Francisco. It secured Series A funding of $2.5 million in November 2009 and has raised $368.5 million in financing overall. In 2015, Credit Karma join the unicorn club (i.e. startup companies that had succeeded in growing and attracting international investments–worth $1 billion or more). At its most recent funding round in 2018, Credit karma was valued at $4 billion and has 85 million members in the US and Canada as of 2019 (Google Capital is an investor).
Customers
Credit Karma has two main customer groups: consumers looking to discover their credit score and companies (i.e. credit/loan providers) looking to sell these consumers products. Also, there is a third customer group consisting of individuals looking for financial help and information while not searching for their credit score.
Engagement — Value Creation Proposition
Credit karma creates value for each customer group in different ways.
How Credit Karma creates value for consumers:
- Credit Karma provides access to an individual’s own credit score free of charge. The site also provides advice and offers a search and comparison engine to enable consumers to find loans and credit cards products that match their credit profile. These products are not provided by Credit Karma and are from the companies utilizing the site for advertising.
- Credit Karma does, however, tailor the adverts shown to match the searchers credit profile. The ability to search by likelihood of approval is not available to customers who do not sign up for the Credit Karma service, but this group of customers can still compare credit cards and access advice.
How Credit Karma creates value for companies:
- Companies draw value from access to Credit Karma’s 60 million users and its ability to use data to target their credit/loan products at consumers who are likely to be approved or who fit the risk profile of the company.
Delivery — Value Chain
How Credit Karma works for consumers:
The service is accessed via website or a mobile device application. Individuals must create a profile and enter personal information to access their scores and recommendations. Unlike other sites that offer reports a customer does not have to register with a credit card. This means that it is easier to join for those that may not own a credit card. Once a customer signs up, they can track their credit rating whenever they choose. The credit is produced by another company independent of Credit Karma.
Consumers can search advice and compare products without a profile, but these results will not be tailored to an individual’s credit worthiness and they will be unable to access their credit score or report.
How Credit Karma works for companies:
Companies looking to showcase their products on the site must contact the firm via email.
Monetisation — Value Capture
Credit Karma makes money mostly by charging fee for companies to promote their product on this engine. Credit karma states it does not sell, rent or share information of its users and it is unclear how profitable credit Karma is as it does not publish detailed financial figures. However, according to one article “In 2017, the company saw revenues grow 37% to $682 million…reports reveal that the company has been profitable since 2015”. Also, the company “has raised $868 million in funding so far from investing including Silver Lake Partners, Google Capital, Tiger Global Management.
Digital Technology
Credit karma uses data to build trust with customers through a chatbot that will increase customer engagement and provide an additional source of data for its product-recommendation engine. Through the collection of ‘taxpayers’ income and other details entered in the tax filing process, Credit Karma Tax sought to recommend credit cards and financial products. Also, Credit Karma leverages technology to launch free ID monitoring to alert its customers as soon as possible if they have been affected by a data breach or if there was suspicious activity on their accounts.
Hulu
Hulu uses a multi-sided platform model in the media industry provides free content to its users, paid by its advertisers.
Overview
Hulu operates a business model often found in the media industry: that of platform business model where content is free to users and paid for by advertisers. These two groups are kept separate – advertising companies do not, nor could not easily themselves, target individual users – they do so through Hulu’s advertising algorithms. In this way, Hulu links these two groups in a way that earns Hulu (and the advertisers) revenue. Hulu also offers Hulu Plus, a product-based business model, in which customers pay a subscription for advertisement-free viewing and access to a more extensive movie and television show database. This write-up will focus on the free on-demand video platform.
History
Hulu, founded in 2007, is an online video service that offers a selection of hit TV shows, clips, movies and more at Hulu.com for free, supported by advertising. Hulu also offers subscription based service Hulu Plus, which allows access to a larger catalogue of TV shows and movies in an ad-free viewing environment. Hulu accounted for 10% of shows streamed Q1 2013. The video on demand industry is a crowded one, with multiple players and business models. Players in the industry compete on price, exclusivity and range of content, as well as user experience in terms of personalization and compatibility with different devices. Some of the largest competitors include Netflix (over 40 million subscribers, the largest video on demand streaming company proving advertising-free service in exchange for subscription fee) and Amazon’s Prime Instant Video offering as a complement to their retail market place business.
Customers
Hulu has users and paying customers; the two are distinct. Firstly, users are viewers of Hulu’s VOD streaming service, most of whom access Hulu’s media catalogue for free. Secondly, Hulu sells screen space and video time to over 1700 paying advertiser customers. Hulu thus deploys a triadic business model: Hulu is the platform that connects paying advertisers to website users.
Engagement — Value Creation Proposition
Hulu engages differently with its users and advertisers: Hulu is a “bus” for users, offering access to the same catalogue of media content, and a “taxi” for advertisers, offering tailor-made access to specific user groups based on user characteristics and viewing selections.
Users: Hulu offers users legal access to wide range of premium content free of charge. Hulu partners with various TV networks to make TV show episodes available within 24 hours or less of their original airtime. Hulu allows different search options for its content, as well as non-personalised recommendations (such as “most popular”). The free version of Hulu only allows accessing content via a computer. Hulu does not let users skip pre-roll ads, while Google’s YouTube does: viewers who opt out of the ads also opt out of the rest of the show they’re watching. Hulu does offer users customized advertising viewing options, such as the ability to swap out an ad or choose one of three ads at the outset of a show.
Advertisers: Hulu creates value for advertisers by offering narrowly targeted high-performing advertising and highly customised service. The company keeps innovating in the ways advertising is delivered to viewers. It offers “instream purchasing” (such as option to order Pizza Hut); cross- platform interactive ads optimized for a user’s current viewing device; and “Hulu 360 Ad,” which will target mobile users. Hulu also uses performance-based pricing mechanism for advertisers (see Monetization).
Delivery — Value Chain
Hulu licenses content from broadcast network and cable network providers, as well as select film studios. Hulu loads advertisements from its sponsors every time a user requests a video. These ads include short video spots that run before and after the video, and during the video’s natural commercial breaks. Each sponsor also contributes ad banners and video overlays, which are displayed with the video and linked to the sponsor’s site. Hulu offers its sponsors a complete list of these and other ad formats in its media kit.
Hulu.com uses Cascading Style Sheets (CSS) and JavaScript to lay out its web pages, and it powers the video and controls it through the Flash player. The site uses the On2 Flash VP6 codec for video streams. This codec is supported by Flash versions 8.0 and higher, which is installed in more than 98% of computers in the U.S. More intensive codecs (for HD video) follows the H.264 video coding standard, which requires Flash 9.0.124.0 or higher. Adobe provides Hulu’s video player platform, Adobe Flash Player. Hulu also collaborates with tech giant Akamai, who manages its content delivery network (CDN).
Monetisation — Value Capture
Firstly, Hulu captures value through advertisement revenue: it sells ad space to more than 1700 advertisers. Whereas usually advertisers are charged when an ad begins playing, Hulu only charges when their ads are viewed to completion. Other companies using this monetization mechanism are platforms, which specialize largely in user-generated content or non-premium content, which is also sponsored by advertisers, such as Facebook and YouTube.
Outcome Health
Outcome Health is a healthcare business using a multi-sided business model to connect healthcare professionals, caregivers, and patients.
Overview
Outcome Health is a healthcare business using a multi-sided business model to connect healthcare professionals, caregivers, and patients through an online platform. Outcome Health supports patient and physician conversations by providing a unique digital platform designed to offer a patient-centric approach to the point-of-care experience.
The company’s multi-sided business model offers on one side free services to patients and physicians by installing hardware in the clinics and providing health content-related; on the other side offers advertisement space to pharma and insurance firms displayed alongside the content supplied to users on the platform. For physicians, Outcome Health create values by delivering content on the devices that can help patients learn more about their condition engagingly. For pharma and insurance firms, the value comes from the opportunity to engage with a larger pool of patients in the care setting.
Outcome Health operates in the context of DTC (direct-to-consumer) advertising focusing on pharmaceutical products and health insurance. Looking at the competition is pretty low as this is a new channel with a few players such as Health Monitor, PatientPoint, Constant Media, and Digital Health, with substantial market opportunities, and enough space for growth.
Outcome Health operates in the US only. In 2017, the company faced charges of fraud in federal court, leading to one-third of Outcome’s employees — about 200 of 535 — to accept a voluntary buyout to leave the company. After the fallout, the company registered $200 million in revenue in 2017 and decreased to less than $100 million in 2018. In 2019, Outcome Health did $130M in revenue, according to the Wall Street Journal.
History
Outcome Health’ was founded and registered as ContextMedia Health LLC in 2006 by Rishi Shah and Shradha Agarwal. The company launched the Exam Room Tablet in October 2013, the first, fully-interactive, and patient-driven patient education tool at the point of care.
In 2016, Outcome Health acquired AccentHealth, doubling its footprint and network platform. In May 2017, Outcome Health closed its first financing round of $500 million, propelling it to a $5 billion valuation and its unicorn status. However, in October 2017, Outcome Health’s co-founders and several employees have been accused of having manipulated pricing and sales information to mislead potential pharmaceutical advertisers purposely.
In 2019, the company sold the majority stake of its business to a private equity firm. Outcome says the funding will be used to fund long-term strategic plans and the company’s ongoing attempts to win back investors, advertisers, and customer trust.
Customers
Patients
Patients in the waiting rooms receive a tablet set up with information relevant to a patient’s pathology and medical history. The tablets also offer meditation apps, allow patients to watch movies, and provide advertising about pharma and insurance firms. This service is provided for free by Outcome Health.
Depending on the access provided by the program, patients can access brand websites, methods of administration videos, safety information, patient testimonials.
Payers
Pharmaceutical marketers pay to reach patients in waiting rooms and physician’ offices. Advertisings are displayed alongside educational materials. According to Bloomberg, outcome Health also collects data from patients and sells it to insurers and drug-makers. For brands, this means a new opportunity to engage with patients in the care setting.
Engagement — Value Creation Proposition
Outcome Health creates value for each customer group in different ways:
-For patients, Outcome Health creates value by providing content on the devices that can help patients learn more about their condition and engage with healthcare professionals and caregivers;
-For payers, Outcome Health creates value by engaging with a larger pool of patients in the care setting.
There are two side network effects: by providing a tailored solution free of charge, Outcome aims to scale the presence of patients very rapidly on the platform to result attractive to payers’ customers, i.e., the pharma companies for their marketing purposes. On the other side, partnering with big industry players would have boosted the physicians to use the platform, knowing the presence of big pharma companies.
Delivery — Value Chain
How Outcome Health works for patients and payers:
-Anatomy boards, interactive educational tablets and mobile connectivity in consultation rooms deliver measurable outcomes through actionable intelligence on conditions, treatments and lifestyle changes;
-The hardware (tv screens and tablets) where the content is displayed is installed at the firm’s expense in the physicians that accept being part of the platform;
-Content is both internally produced and produced by paying marketers;
-Patients can enjoy the content for free.
Monetisation — Value Capture
Outcome Health makes money by charging big pharma and insurance firms to display their advertisings. Pharma and insurance companies can buy ads space on the platform, which will be displayed alongside the educational content to patients. Outcome places screens in waiting rooms and provides patients with a tablet where they will see these ads.
Digital Technology
Outcome Health has invested heavily in its scale of technology implementation at outpatient healthcare facilities, business partnerships, and medical device companies to deliver better health outcomes and positively impact the human condition through technology. Outcome Health relies on digital technology to interact with its final customers as the solution they offer is very much a digital offering to the point-of-care experience. Through the collection of customer data, Outcome Health sought to recommend always a customized offer.
Salary Finance
SalaryFinance offers financial benefit services for employees that allow them to pay personal debt directly from their paycheck at low-interest rates.
Overview
At its core, SalaryFinance offers financial benefit services for employees that allow them to pay personal debt directly from their paycheck at low-interest rates. SalaryFinance prides itself on being a business with a social purpose. Where SalaryFinance consolidates existing personal debts into a single low-cost loan – and with repayments being directly deducted from an employee’s salary – risk premia and lending costs are significantly reduced. This has enabled SalaryFinance to offer a single low-interest rate – typically one-third of the high street bank rate – regardless of the users’ income or credit score.
SalaryFinance offers its services to employers for free, who typically market the service as an additional internal benefit for their employees. The SalaryFinance product is designed to bear minimal administrative burden and risk for employers in assuming liability for the debts of its employees.
SalaryFinance operates a multi-sided business model, as it sells the platform to employers, collects payments from employees’ payroll, and hands the loans to UK’s two largest peer-to-peer lending firms – Zopa and Ratesetter. To these firms, SalaryFinance thus acts as an additional distribution channel, whilst serving as a cheaper borrowing alternative for employees.
History
SalaryFinance was launched in 2015 in London by Dan Cobley, former Google UK MD, Asesh Sarkar, former banking consultant, and entrepreneur Daniel Shakhani.
In January 2015, SalaryFinance had 14 employees. During the same year, the company raised $4m to cover the development of the platform and operating costs. In a second funding round, they raised an additional $6 million.
SalaryFinance has been featured in the Forbes list of “socially responsible British start-ups,” recommended by FT columnist Mrs Moneypenny, and included as one of KPMG’s Global FinTech 100. In February 2016, SalaryFinance entered a new partnership with employee-benefit provider Benefex – with users such as M&S, E.On, The AA and Centrica – making SalaryFinance available to over one million people across the country. Three FTSE companies have already signed-up.
Customers
While SalaryFinance’s core customer groups are employees and peer-to-peer lending firms, it typically approaches companies first, which can join SalaryFinance for free and without any liability. The companies in turn provide access to employees, who are eligible to use the service under the following conditions: employed by the company for over a year, more than 20 years old, borrowing up to a maximum of 20% of gross annual income, and are able to afford repayments. However, without the permission of the employer to access their payroll, the SalaryFinance platform cannot operate.
The second set of customers in this triadic arrangement is the group of peer-to-peer lending firms. As they fund the loans that the employees receive – and in doing socollect interest payments – they pay SalaryFinance a fee for every introduction of a final loan contract.
Engagement — Value Creation Proposition
SalaryFinance’s employee-customers benefit from substantially lower interest rates, as the risk of default in decreased insofar as the repayment is directly deducted from salaries. The average employee is said to save £900 in interest costs by way of the SalaryFinance platform, the equivalent of a 2-3% pay raise. The interest rate is a fixed 7.9% APR for all customers, the rate of the loan does not change based on an individual’s income or credit score. In comparison, the average earning employee with personal debt of £4,000 have high street bank rates: HSBC (18.9%), RBS (19.9%), Barclays (22.9%), Lloyds (24.9%). Typically, the lowest rates advertised by higher-street banks are for those with higher incomes / credit scores and higher loan value. Thus SalaryFinance is most effective for borrowers of amounts below £5000 and earn low income.
Peer-to-peer lending firms benefit from the SalaryFinance platform as it increases the volume of lower-risk loans, whilst releasing them from the burden of payment collection and customer acquisition. In this light, not only does SalaryFinance link together the two customer groups, but also creates greater value for both on account of their interactions.
Delivery — Value Chain
The SalaryFinance platform is available online through mobile, tablet or PC. Once the user has registered and entered its master data, the request is then analyzed, and an individual offer is provided. As soon as a final loan agreement is in place, SalaryFinance manages the collections from payroll via a fully automated system – with deductions noted in the employee’s pay-slip. If a user is to change employer, the repayments are moved from payroll to direct debit, with an equal or higher rate of interest.
To increase the number of employers using the service, SalaryFinance has formed partnerships with employee benefit platforms such as Benefex and GroupSchemes, in turn allowing it to access over 1 million registered employees.
Monetisation — Value Capture
SalaryFinance captures a commission for each new loan it originates in behalf of the funding provider. The service gets paid for each introduction of a final loan contract.
Typically, there is a 7-20% take-up rate per employer, with greatest success amongst employers of middle-to-low income employees. There are no set-up fees and it is possible for users to repay their loan earlier, without charging fees.
SalaryFinance Website: https://www.salaryfinance.com/
http://www.telegraph.co.uk/money/consumer-affairs/…
http://www.fusionwire.net/featured/salaryfinance-o…
https://www.salaryfinance.com/viewarticle?id=11
Info about SalaryFinance History: http://startups.co.uk/startups-100/2016/69-salaryfinance/
Info about SalaryFinance: https://www.blenheimchalcot.com/venture/salaryfinance/
Shazam
Shazam represents an “exemplar” multisided business model in the music sector, where content is free to users and paid for by advertisers
Overview
Shazam represents an “exemplar” multisided business model in the music sector, where content is free to users and paid for by advertisers. Shazam is a free app with which smartphone users can identify music and TV programs by opening the app when the song or TV show is playing. The app portrays advertisements, and because the advertisers and app users are kept separate – advertising companies do not, nor could not easily themselves, target individual users – this is an example of a multisided business model. In a product business model that operates alongside the multisided business model, Shazam also offers Shazam Encore, a premium version of the app, at a cost of £6.99. It is an ad-free environment and includes integration with Spotify and Rdio. Shazam Encore users can also enjoy Full Track playback with Spotify. This write-up will focus on the free Shazam app.
History
Shazam Entertainment Limited was founded in 1999 by Chris Barton, Philip Inghelbrecht, Avery Wang, and Dhiraj Mukherjee. In 2014, Shazam had more than 100 million monthly active users and had been used on more than 500 million mobile devices. Shazam announced its technology has been used to identify 15 billion songs.
Customers
Shazam customers are the individuals who are curious to know more information about the songs they are listening to or the TV shows they are watching. They must have an Internet connection to access to Shazam database. Shazam launched in London and is currently available in 13 different languages. Shazam customers span wide demographic ranges – young to old, wealthy to lower-income, men and women, etc.
Engagement — Value Creation Proposition
Shazam engages differently with its users and advertisers. Shazam offers users free access to the same media database and offers advertisers access to specific user groups based on user characteristics and search histories.
For Users: Shazam offers users free music information by analyzing the captured sound and seeking a match based on an acoustic fingerprint in its database. Users are then given the opportunity to purchase the song.
Advertisers: Shazam operates primarily through its mobile app, and advertising is an inherent element of its app platform. The simple user interface design makes Shazam attractive to advertisers. The company has been a part of 450 ad campaigns.
Recently, Shazam launched a new sales platform Resonate to help TV networks and advertisers connect with consumers on their smartphones and tablets. Networks and brands can integrate the app within TV shows, delivering purchasable content to users.
Delivery — Value Chain
Shazam works by analyzing the captured sound and seeking a match based on an “acoustic fingerprint” in a database of more than 11 million songs and TV shows. The user taps a button in the app while the song or TV show plays, and after 10 seconds – if the song or TV show is in Shazam’s database – the user is given the song/show title and other information, and the opportunity to purchase it online. The app can identify only prerecorded music and TV shows, but these can be recognized from a variety of broadcast sources such as radio, TV, restaurants and clubs (provided the background noise does not interfere with the “acoustic fingerprint.” Once the song or show is recognized, Shazam incorporates links to services such as iTunes, YouTube, Spotify and Zune, where users can purchase the media.
Shazam partners with various music label companies such as Entertainment UK, whom they approached to digitise their music catalogue of 1.5 million songs in return for permission to create a proprietary database.
Monetisation — Value Capture
1 Referral fees: Shazam makes money by referring users to iTunes where they can buy songs, or to Spotify where they can buy a subscription. Shazam receives a portion of each purchase for the referral. Shazam estimates that digital sales generate $300 million annually. Of the 17 million tags per day, 5 to 10 percent result in a purchase, the majority of which are music, while TV shows, films and apps continue to grow within Shazam’s portfolio. Partners like Apple, which has integrated Shazam’s service into Siri for iOS 8.
2 Advertising: Shazam operates through its mobile app, and advertising is an inherent element of its app platform. The company has been a part of 450 ad campaigns, which cost between $75,000 and $200,000 and runs for a couple of months. On its own, advertising generates a multi-million dollar business
https://en.wikipedia.org/wiki/Shazam_(application)
https://www.investopedia.com/articles/personal-finance/010815/how-shazam-makes-money.asp
Snapchat
Snapchat operates a multi-sided business model via a photo and video-sharing mobile application and monetise by charging selected advertisers.
Overview
Snapchat operates a multi-sided business model via a photo and video-sharing mobile application, where the shared content is deleted as soon as it is viewed. It also offers a ‘stories’ feature, which allows users to upload photos and videos that can be viewed by their audience numerous times for 24 hours. In a similar vein, Snapchat also allows ‘world-class leaders in media’ including social networks, magazines, and television to post content under the ‘Discovery’ category that can be viewed by all users for 24 hours. The concept seems counterintuitive at first, but as digital photography has become commoditised, the younger generation has grown to find it very appealing. With a minimal interface, users can quickly ‘snap’ a picture or a 10-second video and send it to their friends, without having to worry about repercussions as they ‘self-destruct’ upon viewing. The founder Evan Spiegel claims that: ‘Snapchat isn’t about capturing the traditional Kodak moment. It’s about communicating with the full range of human emotion — not just what appears to be pretty or perfect.’ (Snapchat, 2012)
Snapchat can only be used on Apple and Android devices, with no support for desktop PC planned. Snapchat is soon to be valued at over $20 billion (CNN, 2016).
History
Started as a conceptual idea by three Stanford fraternity partners in 2011, Snapchat has observed a meteoric growth over the last five years. From just 20 photo shares an hour, Snapchat now experiences 10 billion video views a day (Mashable, 2016).
Customers
Snapchat’s first customer group is embodied by a tech-savvy, smartphone-owning audience. The service is free for users to sign up and use without limits. The core offering of Snapchat – namely the vanishing photos and videos – has widely appealed to a Millenial audience.
The free Snapchat offering is cross-subsidized by a second customer-group – advertisers who wish to advertise to the millennial crowd. Snapchat has incorporated a Discover page that holds their advertising partner channels. Rather than displaying banner advertisements that most people either block or ignore, Snapchat users actually connect and engage with the custom-made and interactive advertisements. Early partners include Buzzfeed, Vice Media, MTV, CNN, and People magazine. These ads are isolated to the Discover page within the app.
Additionally, Snapchat has recently started placing engaging video ads within snaps being viewed by people. However, in contrast to most of their Silicon Valley colleagues, all ads can be easily skipped and swiped off the screen.
Engagement — Value Creation Proposition
This commitment to unobtrusive advertising and avoiding collecting vast amounts of user data like Facebook and Google has appealed to many young users. Snapchat increases the attractiveness of its content-sharing interface by offering a range of fun ‘filters’ for its young audience to use. This, in turn, renders the overall experience lively and light-hearted, thus fuelling content-sharing.
Currently there are about 16 million monthly (one-third of UK smartphones users) and 10 million daily Snapchat users in the UK. However, what is most interesting to potential advertisers is the demographics of Snapchat’s user base. With 71% of users under the age of 34 –70% of which are female (WSJ, 2013) – Snapchat claims to reach 30% of all millennials in the US (Omnicore, 2016). This is extremely attractive to advertisers as they are able to reach precisely the generational cohort that proven to be most difficult to sell to.
Even though the ads on Snapchat may not be as finely targeted as they can be with Facebook or Google, Snapchat has the distinct advantage of being able to capture a growing demographic.
Delivery — Value Chain
Beside some strategic acquisitions that have boosted the functionality and options of the Snapchat app, the company has so far managed mostly in-house. Snapchat maintains full control over the user experience, and advertisers must go through Snapchat to reach users. Most advertisers produce ads for the sole purpose of advertising on Snapchat, as the long portrait screens of most smartphones require different framing to traditional widescreen ads.
Monetisation — Value Capture
Unlike the likes of Facebook and Google, Snapchat offers its services to a few large localised advertisers rather than many small ones. This means that most prices are bespoke according to reach and views, as well as the region it will be published in.
CNN, 2016. Snapchat could soon be valued at more than $20 billion. [Online]
Available at: http://money.cnn.com/2016/05/24/technology/snapcha…
[Accessed 2016].
Ft.com. (2016). Snapchat an enduring hit with British users — FT.com. [online] Available at: https://www.ft.com/content/f781b74c-243f-11e6-9d4d… [Accessed 10 Aug. 2016].
Mashable, 2016. Snapchat users are watching 10 billion videos a day. [Online]
Available at: http://mashable.com/2016/04/28/snapchat-video-view…
[Accessed 2016].
Murdock, R., 2013. Snapchat Is Intrinsically Worthless. [Online]
Available at: http://www.businessinsider.com/snapchat-business-m…
[Accessed 2016].
Omnicore, 2016. Snapchat Statistics. [Online]
Available at: http://www.omnicoreagency.com/snapchat-statistics/
[Accessed 2016].
Snapchat, 2012. Snapchat Blog – Let’s Chat. [Online]
Available at: http://snapchat-blog.com/post/22756675666/lets-cha…
[Accessed 2016].
WSJ, 2013. Snapchat CEO says 70% of users are female. [Online]
Available at: http://blogs.wsj.com/digits/2013/11/20/snapchat-ce…
[Accessed 2016].
Waze
Waze operates a multi-sided business model that offers advertisement-supported free GPS services to drivers.
Overview
Waze represents an “exemplar” platform business model in the navigation industry that mobilises location technology. The firm fully mediates the relationship between (a) drivers wanting navigation information, notably routes and live traffic information (they have the app on their phone) and (b) advertisers who want to access customers with contextual (location and time) based advertising. These two groups would not normally interact – they do so only through Waze’s platform. The platform takes the form of an app for mobile phones along with the supporting infrastructure. The app not only mobilizes mobile phone technology, but also GPS satellite location technology because it both pin-points the driver’s location and presents navigation routes shown on the mobile phone display.
History
The company was founded in Israel in 2009 and sold four years later to Google for US$1.15bn in June 2013, providing Google with crowd-sourced content for its Google Maps service. Waze raised US$12 million through a series A funding round in March 2008. It went on to raise a further $30 million in 2011, which took it to $67 million in private funding in total. Following the sale, Noam Bardin transitioned across to Google, whilst the other cofounder, Uri Levine is now running FeeX. At the time of its sale Waze had 50m users, a figure largely built using social media. At this point its revenue was said to be nominal but the annual revenue potential to Google exceeded $90m from location-based advertising. The sale shows how it is possible to defer value capture by instead focusing on building a large user base.
A large number of mapping apps are available but perhaps most interesting is crowdsourced mapping company Telenav-Scout, which focuses on personalised mapping to differentiate itself from Google Maps. Scout aspires to be more like Yelp and TripAdvisor, though even broader and more encompassing — with maps and navigation at the core. And like Apple, Nokia and Google Maps, Scout has deals with car manufacturers, and is putting its brand, data and functionality into cars.
Customers
The business model represented by Waze connects three groups of people – (1) drivers (consumers) needing navigation information “immediately”; (2) a community of drivers who use their mobile phones to capture live mapping information; and, (3) advertisers who can pay to have their businesses show up on maps when drivers are nearby. Drivers with the app installed on their phone totaled 50m in 2013 across nearly 200 countries.
Engagement — Value Creation Proposition
By giving drivers real time traffic information from a crowdsourced community of mobile phone users, the value proposition translates to an average daily time saving to a Waze user in Israel of 5 minutes, on their daily commute, as well as a reduction in stress. Waze offers more value than paper maps and printed directions, as well as being integrated into smartphones and cheaper (free) than standalone GPS navigation devices, which use much of the same technology. Because Waze calculates traffic flow in real time, drivers are notified of delays ahead in real time and are diverted along alternative and quicker routes. Contextual advertising relevant to driving time and location are targeted at the Waze community. Waze relies on its 50m million users to effectively act as traffic police, field operations and cartographers, flagging and recording updates on accidents, bottlenecks and traffic as they drive. It absorbs and aggregates these data (on speed, location, routes and so on) in real time, using algorithms to build and refine its own maps and to calculate the best possible routes (and re-routes) for its drivers. Because of the customer value, Waze users are keen to share their experience via social media, which has been a valuable network effect in building the community of users (for free), increasing the value of the business. With smartphones already in the users’ pockets, once Waze built the navigation app, it spread quickly at virtually zero marginal cost.
Delivery — Value Chain
When a customer launches Waze on their phone, they automatically see their location on the map and relevant information on traffic delays on their proposed route. Alternative routes are suggested to avoid incidents and congestion. Waze uses are also information contributors. By agreeing to give away location privacy, users provide much of their driving and location data. To crowd-source road conditions, users have two options, (1) They can actively input useful information such as nearby fuel stations, closed down roads, or car accidents, or (2) they can passively drive using the app, letting it collect intelligence as they drive. Both scenarios mean that Waze not only collects plenty of useful data for companies in the advertising business, but that it has the potential to collect very specific, correct location based data from willing customers.
Monetisation — Value Capture
Monetisation comes from fees paid by advertisers to be able to show drivers their businesses or related offers. Geo-located pins are placed on the maps to make drivers aware of, for example, fuel stations and coffee shops.
We R Interactive
We R Interactive operates a multi-sided business model that offering virtual games for free to players while charging companies for in-game promotion fees.
Overview
Video game developer We[R]Interactive enacts a platform business model. A free-to-play video game is marketed towards a highly segmented target group which is leveraged as a platform for exposure to relevant brands that pay to have a presence on the platform. We[R]Interactive is inherently linked to football career simulation video game ‘I Am Playr’. I Am Playr lets the end-user emulate the life of a professional football player, both on and off the pitch. The video game’s demarcated end-user demographic of young adult males in a given geographical territory makes for a lucrative value proposition to certain brands (e.g. Nike). We[R]Interactive lets end-users enjoy the core content of the game free-of-charge in order to quickly attain a large and active installed base that is leveraged to attract paid-for product placements from brands. These product placements are, in turn, utilized as a unique selling proposition for end-users that authenticate the in-game experience.
History
The London-based investor-backed firm was incorporated in 2010 when its founders recognized a market opportunity for interactive entertainment with high-end production values. Fuelled by the advent of digital distribution channels (e.g. PlayStation Network, Steam, Facebook), many games developers flooded the market with low-cost and low-quality video games that were priced competitively but offered little entertainment value to the end-user. We[R]Interactive’s “I Am Playr” fuses 3D gaming with premium quality first-person video footage to offer its users high-end production values in the form of a free service. The 50-person team is looking to replicate its multisided market place business model of free-to-use games subsidized by paid-for brand advertising in their upcoming music star simulation game ‘I Am Star’.
Customers
We[R]Interactive aims to court two distinct groups – end-users who play the video games for free, and the brands who pay to use the game as a platform for product placements. Without a large base of end-users that display some overlap in brand preferences and tastes, We[R]Interactive would have difficulties attracting corporate brands to embed their products on a paid-for basis in the game. It is for this reason that the firm spends heavily on marketing in order to quickly ramp up the number of end-users. Brands that advertise on I Am Playr are often companies that have a vested interest in young males with a love for football and include the likes of Nike, Red Bull and Mini Cooper.
Engagement — Value Creation Proposition
At the content level, I Am Player aims to lets the end-user simulate the life of a professional footballer, and tries to create a unique game that brings football fans closer to their passion. The content is offered in a way such that end users are incentivized to constantly check back in with the game for updated player statistics, new challenges and steady progression to the virtual player’s career. In 2013, I Am Playr was played by more than 7.5 million people.
Value to the brands that choose to virtually display their products in the game is two-fold. First, brands benefit from exposure to a highly targeted group of prospect customers and insight into their accompanying demographics (age, gender, location, various football preferences). Secondly, end-users engaging with the content unintentionally teach the brand about their brand preferences. For example, at some point in the game players can (and will) win a fully customizable (color, interior, etc.) Alfa Romeo. After the player customized his car, it is his to use throughout the game. Besides mere exposure, this type of end-user engagement thus generates statistical market research for the brand.
Key to a two-sided business model’s value proposition is indirect network effects. Aspiring superstar football players stand to gain from deep levels of brand engagement as it makes their experience more authentic (since launch, over 455,000 Nike football shoes were sold through the game). Brands on the other hand gain from surges in end-user adoption of the game as it will increase their levels of exposure and the insights they gain from acquiring brand placements with We[R]Interactive.
Delivery — Value Chain
I Am Playr is offered in multiple forms via various online distribution channels. The standalone web version offers the complete experience and can be seen as the cornerstone of the value proposition. End users can go online and create a profile and start their football careers using the web version. Companion apps were later added on mobile and social platforms. Players can take their profile to the Facebook, MSN, Apple’s iOS or Google Play We[R]Interacgive apps to play a slew of mini games to hone their skills which will unlock certain items in the main game. This strategy was implemented with the intention to redirect traffic back to the standalone web version of the game.
Monetisation — Value Capture
A small percentage of I Am Playr’s user base is monetized by offering the possibility of purchasing in-app purchases that will accelerate the player’s experience. For example, when a player runs out of energy he can charge his wallet to buy a can of Red Bull, or he can just wait until the virtual character’s energy replenishes. However, the majority of We[R]Interactive’s income is generated via brand integrations as mentioned above. A brand that desires to have its product placed within the game is charged contingent on the level of brand integration. This can range from pure advertising to deep levels of integration as in the case of Alfa Romeo. Given the technical costs and the cost of digitalizing and integrating brand content into the game, all brands pay an initial fixed fee.
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